The apprenticeship levy was introduced by the government in 2017 as part of their industrial strategy. The goal of it is to increase skills and productivity across the UK. With the implementation of this apprenticeship funding, the government aim to reach 3 million apprenticeships by 2020.
What is the apprenticeship levy and how does it work?
Organisations with an annual wage bill of £3 million or more are now required to contribute 0.5% of this bill to the apprenticeship levy. The levy is reported and paid through the PAYE process. The funds paid into the apprenticeship levy can then be used by the organisation and spent on apprenticeship training costs. The funds stay in employer’s accounts for a maximum of 24 months, if they are not used they are lost.
The money in the employer’s apprenticeship levy accounts is calculated like this:
The levy you declare to HMRC through the PAYE process is multiplied by the proportion of the bill paid to the workforce who live in England plus a 10% government top-up on this amount.
Businesses who do not have an annual wage bill of £3 million or above are not required to pay into the apprenticeship levy. SMEs classed as non-levy paying can however apply for apprenticeship funding from the government if they wish to hire apprentices.
How does apprenticeship funding work for SME’s?
For those businesses with a lower than £3 million per year wage bill, apprentices are still a huge asset. The government recognises this and supports SMEs with the costs of hiring apprentices. The cost of the apprenticeship training and assessment is shared by the SME and the government via their co-investment scheme.
The rate of investment is proposed to change from April 2019, making it an even better deal for SMEs. Where they were previously required to pay 10% of the training costs with the government making up the other 90% up to the funding maximum, the proposed changes will mean SMEs only need to contribute 5% of the costs and the government will invest the remaining 95%.
Further to this, Businesses with under 50 employees won’t have to pay anything towards the cost of training of an apprentice if they are under the age of 19. The business will receive a £1,000 payment, with an additional £1,000 paid to the training provider.
Should I consider an apprentice for my SME?
The apprenticeship funding is a fantastic incentive for organisations of all shapes and sizes to recruit apprentices. SMEs have an even greater incentive with the co-investment scheme. The majority, if not all of the training costs are met by the government. This means that smaller businesses can hire keen and able staff, who are excited about learning new skills.
The benefits of hiring apprentices are plentiful, from increased retention rates, productivity and staff morale, to securing the best new talent and training them in the ways of YOUR individual business.
Those that have already recognised the benefits of apprentices are reaping the rewards. If you haven’t already looked into hiring apprentices, it should be something you seriously consider.